Centre widens definition of MSMEs, raises investment limits

In a major move to benefit several businesses in the country, the Centre has decided to review the definition of Micro, Small and Medium Enterprises (MSME) and announced increase of investment limits.

According to Finance Minister Nirmala Sitharaman, the additional criteria of turnover has also been introduced for recognition of an MSME. Further, the government has also done away with the distinction of services and manufacturing MSME.

As per the new changes, businesses with investment of less than Rs. 1 crore and turnover of Rs. 5 crore would be classified as micro enterprises. Under the existing criteria, a company with investment of less than Rs. 25 lakh in the manufacturing sector and less than Rs. 10 lakh in the services sector were considered micro enterprises.

The investment limit of small enterprises has been increased to Rs. 10 crore, and the companies would have to have turnover of less than Rs. 50 crore.

Further, the investment limit for medium enterprises has been increased to Rs. 20 crore and the turnover limit has been kept at Rs. 100 crore. Sitharaman said that the necessary amendments to laws will be brought about to give effect to the changes. Among other measures for MSMEs, she has also announced collateral free automatic loans for businesses including MSMEs up to Rs. 3 lakh crore. Under the measure, borrowers with up to Rs. 25 crore outstanding and Rs. 100 crore turnover would be eligible for the special collateral free loan.